Once again its Japan’s exports, not China’s that tell a lot about the real state of the global economic demand and its weak growth prospects.
Chinese export growth has been surprisingly solid for the past three months, leading some analysts to believe that the global economy is improving.
But Japan is a better indicator with its high-value exports like cars, computers and other electronics, industrial products, and other manufactures.
And the news isn’t good with exports suffering a double-digit decline for the fourth month in a row as the coronavirus pandemic whacked global demand, reinforcing expectations that the Japanese economy is now in its deepest recession in decades.
The country’s Ministry of Finance said on Monday that Japan’s exports slumped 26.2% in June from a year earlier, bigger than the 28.3% fall in May and the worst downturn since September 2009 (in the GFC).
The slump was driven by a large annual fall in car exports to the US, Japan’s main export item.
Reflecting weak demand and weak oil prices, imports fell 14.4% in the year to June, leaving a trade deficit of 268.8 billion yen ($US2.51 billion).
It was another weak performance with the US that stood out, strongly suggesting that President Donald Trump is pedaling air in his belief that the US economy is recovering.
US-bound Japanese shipments nearly halved again due to plunging demand for cars and auto parts, while exports to China were again weak in June, pointing to continuing weak demand in the world’s two major economic growth drivers.
US-bound exports from Japan slumped 46.6%, due to 63.3% fall in car shipments, a 56% drop in airplane engines, and 58.3% fall in car parts.
Exports to China, Japan’s largest trading partner, fell 0.2% in the year to June, as declines in shipments of chip-making machinery and chemical materials more than offset the increase in nonferrous metal and car shipments.
Global demand for cars and other durable goods has sunk since March as the pandemic moved out of China, into Europe, the uS, the rest of Asia, South America, Russia, and Africa.
That has not only forced the first round of lockdowns in many countries, but a second wave is underway in the US, Australia, Hong Kong, Singapore, parts of China, Spain, Africa, Brazil, India, and a number of smaller economies.
Shipments to Asia outside China, which account for more than half of Japanese exports, declined 15.3%, and exports to the European Union fell 28.4%.
Like a number of other economies, Japan slipped into recession for the first time in four and a half years in the March quarter and is on course for its deepest postwar slump as the COVID-19 crisis weighs heavily on businesses and consumers (and has slashed tourism income because of the postponing of the Tokyo Olympics until 2021).
